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School-bank arrangements clearly narrow students’ banking choices when a school delegates to a bank the task of disbursing aid, and only students who are customers at that bank have quicker access to the money. Students in desperate need of money are forced to create an account with that bank and stick with it, regardless of whether it demands high fees or changes policies.
These deals between universities and financial institutions, the report says, “create at least the appearance of a conflict of interest as schools may be tempted to choose the arrangement that gives the school the most money rather than the arrangement that gives their students the best deal.”
Everything the report describes is legal, Williams said as it was released. Still, some members of Congress have asked 15 financial institutions to provide information on fees. Some lawmakers have also requested that the inspector general at the Department of Education examine the arrangements to see if they hurt students and adhere to federal regulations.
It’s reassuring that Congress is taking a closer look at the arrangements to determine whether they enable students to be lured into unfair credit card or loan deals. As the report recommends, universities, in turn, should disclose contracts so students can see if they’re getting the best deal.
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